Earnings: The Indispensable Element Of Great Stocks

Evaluating Earnings

Unless you have time to sift through endless earnings
reports, odds are you'll miss out on those companies
announcing superior earnings. And how do you know the
difference between a one-hit wonder and a potential
stock market winner when you are looking at raw earnings
numbers on thousands of companies?

Investor's Business Daily compares the earnings performance
of all domestically traded stocks each day using its
proprietary Earnings Per Share Rating. The EPS Rating
measures each stock on a scale of 1 to 99 (99 being
best) for a quick assessment. An 80 EPS Rating means
that stock is outperforming 80% of all other stocks
based on earnings growth. Seen another way, a stock
with an EPS Rating of 80 is in the top 20% of all stocks
in terms of recent quarterly and annual earnings growth.
Our research shows that the stocks that make powerful
gains usually have an EPS Rating of 80 to 85 or higher.

The EPS Rating is found in the IBD SmartSelect®
Corporate Ratings, a compilation of five financial-performance
gauges on every stock that appears in the daily stock
tables. The EPS Rating is found in Investor's Business
Daily, Daily Graphs® and investors.com's IBD Charts,
IBD Stock Checkup and My Stock Lists.

To further evaluate and compare earnings performance,
you can log onto Daily Graphs Online®. You'll find
a menu of performance reports, including a list of the
stocks with Top 100 EPS Ratings for both the New York
Stock Exchange and the Nasdaq Stock Market.

This is an example of a Daily Graphs Online® chart,
showing earnings data in the upper left boxes and along
the bottom.

Stocks don't live on strong earnings alone. The performance
indicators in IBD SmartSelect® Corporate
Ratings help you round out the stock selection process.
This set of tools also compares other meaningful factors,
such as sales growth, return on equity, profit margins,
industry vitality and a stock's price performance.